Freelancer or Salaried: How your income is taxed differently in ITR 2025

ITR filing tips for a consultant

With ITR 2025 filing season underway, many freelancers and consultants are unsure about how their income is taxed differently from salaried individuals. Here’s what you need to know before choosing the right ITR form and claiming deductions.

I am freelancing as a content writer and earn approximately Rs 1 lakh every month. Which ITR form should I fill? Is there any difference in how my income will be taxed now? How is the income of a consultant taxed? Is it different from how a salaried individual's income is taxed?

Expert Advice: Income earned as a consultant is taxed under the head “Profits and Gains of Business or Profession”, whereas salaries received by an employee are taxable under the head “Salaries.”

As a salaried individual, you are allowed to claim a standard deduction of up to Rs 50,000 (under the old tax regime) without submitting any documentary proof. If you opt for the new tax regime, the standard deduction increases to Rs 75,000.

Freelancers, however, are not eligible for standard deduction. Instead, they can claim actual business-related expenses incurred in the course of their work, excluding personal expenses. These may include internet and mobile bills, stationery, printing, conveyance, and similar costs, proportionate to their business use.

If you're living in a rented house and using part of it for work, you can claim a reasonable portion of the rent and electricity expenses against your consultancy income. You can also claim depreciation on assets like a computer, printer, and other office equipment, along with their repair and maintenance costs. These examples are illustrative; any other legitimate business expense can also be claimed if you can justify it.

Your net taxable income is the amount remaining after deducting eligible business expenses from your consultancy income, and it's taxed under “Profits and Gains of Business or Profession.” Any other income like rent, interest, dividends, or capital gains will be taxed under their respective heads and added to your total income.

Under the old tax regime, you can claim various deductions (like those under Sections 80C, 80CCD, 80D, 80TTA, etc.) just like salaried individuals. If you're staying on rent, you can also claim a deduction under Section 80GG, up to Rs 5,000 per month.

The net income, after all deductions, is taxed as per the applicable slab rate. Certain capital gains may be taxed at flat rates depending on their nature.

Since you are freelancing as a content writer, you cannot opt for the presumptive taxation scheme. You will need to file your ITR using Form ITR-3.

There is no difference in tax rates between salaried individuals and freelancers—the difference lies in how income is classified and what deductions are available.